The Payments Experts Podcast
Expert payments attorneys discuss the electronic payments industry from a legal perspective.
The Payments Experts Podcast
Hemp Ban Shockwave: Why A Quiet Hemp Rule Could Upend Electronic Payments Overnight | PEP081
Hemp Ban Fallout: How Policy Whiplash Hits Payments, Portfolios, and Merchants. Hosted by Global Legal Law Firm Managing Partner James Huber and Senior Associate Attorney Bryce Van De Moere
A sudden hemp or cannabinoid ban doesn’t just change SKUs—it detonates risk models, freezes reserves, and scrambles underwriting across entire portfolios. In this episode, we unpack how shifting federal–state rules, card-brand policies, and retailer enforcement create a perfect storm for ISOs, PayFacs, acquirers, and merchants operating anywhere near hemp, CBD, delta-8/10, or “functional” products.
We move past the headlines to the operational reality: MCC assignments that suddenly look “high-risk,” sponsor banks tightening controls, BIN-level pressure driving early enforcement, and offboarding protocols that leave merchants without token access or refund options. If you own portfolio exposure—or sell into these verticals—this conversation gives you a realistic way to protect revenue without inviting regulatory heat.
What’s at stake
Portfolio shock: Rapid policy shifts drive reserve hikes, rolling holds, and frozen payouts that cascade across portfolios.
Regulatory overlap: Farm Bill ambiguity, state AG actions, and network rules collide—leaving merchants compliant in one lane and out of bounds in another.
Processor posture: Heightened KYC/KYB, product-level reviews, and SKU scanning that turn “low-touch” boarding into ongoing surveillance.
Litigation vectors: Deceptive practices claims, labeling variance, age-gating failures, and unfair competition allegations—often leveraged after a payment cutoff.
What we cover (practical and tactical)
Mapping the risk perimeter: Hemp vs CBD vs delta-8/10; how labeling, THC thresholds, and packaging claims change your risk category overnight.
Underwriting changes you’ll actually see: Document asks, site/photo audits, ingredient attestations, SKU-level approvals, and re-verification cadences.
Card-brand rules in practice: What “permitted with restrictions” means for your receipts, disclosures, and refund timelines; when MCC re-codes are necessary.
Offboarding without chaos: Token portability, refund runways, age-verified customer lists, and inventory liquidation strategies that reduce complaints and chargebacks.
Dispute defense in gray zones: Evidence sets that win (COAs, batch IDs, age verification logs, delivery confirmation) and when “refund first” beats “fight first.”
Ops knobs you can turn today: BIN rules, shipping blacklists by state, adult-signature requirements, SKU-specific routing, and refund automation triggers.
Alternative rails, done right: Where ACH/pay-by-bank and wallets help—and where they create new compliance workstreams and reconciliation debt.
Field stories and failure modes
MATCH and mislabeling: How a single mislabeled product can trigger portfolio-wide scrutiny and a five-year hangover if records aren’t corrected fast.
Secret-shopper reality: Entry signage, web product pages, cart disclosures, and line-level receipts—why “register-only” notice is a fine magnet.
Stacked fines and common ownership: How assessments replicate across related entities when documentation and SKU controls are inconsistent.
A usable playbook for payments teams
Re-verify your book: Run a hemp/cannabinoid sweep—SKU lists, labeling, COAs, age gates, shipping lanes, and ad claims.
Board with attestations: Product-category, labeling compliance, age-gating, shipping lanes, and refund policies—signed and renewed on cadence.
**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**
Visit us today: https://www.globallegallawfirm.com/
A payments podcast of Global Legal Law Firm
If I'm in the cannabis of the hemp industry, I am nervous. Yeah. One, this is a humongous departure from where things were heading. That's it, you know what? Bernie, I think, said when he was running, you know, I legalize, you know, and everything, the government's staying out of it. You know, there is a big thing. I know like organizations like normal are gearing up for this is a preemption issue because it's state's rights, but we're not seeing a lot of that being, you know, there's there's federal troops running all over the place, stepping on states' toes. So if I'm in that industry at any level, I am nervous about where things are going. Yep. Very, very nervous about where things are going and my ability to remain in that business.
SPEAKER_00:Welcome to the Payments Experts Podcast. A podcast of Global Legal Law Firm. We hope you enjoy this episode. We're really excited in studio today. We're joining us senior associate attorney Bryce Vandemore, as well as managing partner of the law firm, James Huber. General, we're talking about the hemp ban. We maybe we'll talk about is it a ban? What does it mean for our uh clientele, our listeners? Jump right in.
SPEAKER_02:Yeah, I mean, but for me, this came out of nowhere, but we had somebody on the podcast last week, Jeremy, that was kind of seemed like he knew this was coming. He must have been reading the tea leaves. Remember that? He's like, it's happening. Yeah, yeah. I was like, oh, this guy's crazy. Um, but yeah, it happened. So effective in one year, uh, any hemp that has point, I think it's like point zero, point zero three or something THC is a Schedule One drug, just like it is marijuana, cannabis, whatever you want to call it. And my understanding is that it's basically impossible to make hemp that doesn't have some trace amount of THC. And what it did is basically the farm bill left open a loophole for hemp to be processed because hemp is a wildly lucrative crop to grow. And they're saying, you know, look, the farm bill, it never had the intent of leaving this industry, this product completely unregulated. Yeah, it did. That was the whole point. It was a it's non-psychoactive. I don't know. People take C BD and say it does something.
SPEAKER_01:I've never hit or miss on the C BD. I don't know that I'm I think like muscle cream.
SPEAKER_02:Actually, we had a client whose legs were all bruised and he's in that industry. It'd be interesting to see what he thinks. And he's rubbed it on. He's like a professional fighter, and he's like, look, one day the bruises are gone. So maybe he's got the good stuff. I don't know. But, anyways, you know, it doesn't get you high, right? The CBD. Um so the whole thing is, you know, they use hemp for everything. Clothes and clothes, bro.
SPEAKER_00:Medicine.
SPEAKER_01:Wasn't that the whole deal with hemp in the first place? Is that it was basically gonna wipe out the cotton, the gun industry because it's a more gun industry. The cotton. Oh, cotton. Yeah, it was it would it was everyone will be too lazy and stop shooting. Well, yeah, everybody's too high to get to shoot.
SPEAKER_02:Yeah, yeah, no, I think yeah, because it's I remember we had the our tennis, uh, our tennis uniforms in high school had a uh hemp leaf on them. We were like, this is awesome. This is awesome, yeah. Uh because it was all made out of hemp and they were great shirts. So, anyways, what does this mean for the payment processing industries? One, you know, big hemp sellers, they're just processing payments regularly, just like a regular store selling cotton. So they are scrambling. They don't know what the fuck to do. We've got you know, clients going, what are you know, this is coming. So, number one, we don't know what's gonna happen. So they said give it a year, go figure it out, go make some framework. Now, Bryce said, you know, Texas is completely fucked from this. But Texas, I think, is a was it$30 billion,$30 billion industry in hemp. Wow. That might include cannabis too, though. I don't know.
SPEAKER_01:No, well, it it it's uh it included like the Delta 8 and the Delta 9. Okay. Who have who have the below the 0.03, but it's still but that stuff actually gets you high. It does, yeah. My understanding is I do my research. I do my research. It's like, you know, it's um it's it's basically marketed, uh, I've seen it marketed as it's just it's basically weed for people that don't like to get blasted. Okay. So it's like starter, starter barrels.
SPEAKER_02:It's like what probably we were smoking in high school. Yeah, I mean not us.
SPEAKER_00:I was gonna I was gonna say probably weed in the 60s was probably basically. Weed in the 60s. That's like the 90s and 2000s.
SPEAKER_02:Anyway, so the uh that was weird. So Texas, Texas is screwed because they have that's a huge industry. So the crops, which my understanding is, you know, you throw a seed in the dirt and it sprinkles up. Now, I remember trying that in high school and it didn't work.
SPEAKER_01:Well, my understanding is though that the legislature had our had already been attacking it, and it's and it's a huge moneymaker for the state.
SPEAKER_02:It's a huge moneymaker, and there's you know, gotta be something at play. I don't think that Texas is a big cotton growing or whatever, but I don't know. So there's it's really weird to see wanting to shut down a whole industry that generates a ton of money, particularly one that affects farmers who are already who are already taking a massive hit anyway. That are already taking a massive hit. And this is something where it's low maintenance. I don't know if it's a ton of water or not, but it's like, what are they what are they gonna grow now? Their margins just went way down because you grow this and easy peasy.
SPEAKER_00:Yeah, what's Northern California gonna do? Well, I think to your point, you know, it's uh to kind of make it as clear as possible hemp is not a drug, right? That's the problem. At least I know in my home right now, my wife, she got you know hemp uh oil for various things. She uses hemp even protein in her protein shakes.
SPEAKER_02:Oh, yeah, right. Yeah, what do you do with that? I remember like there's hemp seeds at the salad bar. Yeah, exactly. So those are done.
SPEAKER_01:Yeah, what what I'm concerned is gonna happen because I've I've seen this lately. Because my my angle has always been, or or my what I'm professing to these people is that in order to have a match violation, you have you have to it has to involve peanut processing. You can't have you know, matches for card processing violations, like misuse of card. So that basically means you have to have in a transaction. But what I am seeing now, sporadically, but I I'm afraid it's gonna snowball, is that MasterCard is if if you even have like some component of your of your shop or your store selling something that they don't like, even even if they would only take cash or even if it doesn't involve a credit card, they're gonna get matched for a violation of standards because basically your your store is offering something that they think is objectional.
SPEAKER_02:If you're a health food store and you've got a bar of soap that's hemp infused, you know, arguably they could come kick down the doors and arrest you because you're selling a Schedule I drug now.
SPEAKER_01:Yeah, but it's but e even if you're not taking a credit card for it, it still skeeves them out. And I so I'm I'm afraid that that's that we're gonna have it's gonna be the peptides all over again, which is where they just cut everybody off at the knees without without any any investigation whatsoever. It's just it's just safer to cut them loose and put them out of commission for five years than to actually like look in look into it.
SPEAKER_02:Well, I could see I like we said that they've got a year, but I could see this starting to happen right now, today, where they're going, hey, we don't want to worry about this, we're gonna shut you down. So now what do these people do? So, you know, okay, go look at the guys that are selling cannabis. What are they doing? They're doing cashless ATM, which is a transaction that mimics a ATM transaction, which I've always, you know, people have all this flack about, but I'm like, what's the difference between the ATM machine sitting in the corner and cashless ATM? And now there's some issues with the, you know, how the merchant gets charged their or the cardholder gets charged their network fees and all of that, but they get that same thing going to the ATM. But anyways, there's issues with that potentially for the cardholder. But you know, if you're buying marijuana, like Bryce says, like these damn kids don't remember the days of having to sit in some sketchy dude's house for a half an hour pretending like you're not there just to buy the weed.
SPEAKER_01:And it shows.
SPEAKER_02:And if if I'm willing to go spend 30 minutes to an hour watching some guy like a blow gun, he was like blowing darts into things, and I'm like, uh, and he's got this dog with this purple tongue, and I'm like, yeah, it's really fun hanging out. I'm willing to go into a weed shop now, sonny boy, and pay an extra six bucks. Because think of what you just say. You're not getting threatened by blow darts and some big dog named Keda.
SPEAKER_00:I think we knew the same guy, James.
SPEAKER_01:And I love I love that that meme that you you mentioned off of uh kind of like I I had to I had to smoke out of a Coke can that you could vape and target.
SPEAKER_02:Exactly.
SPEAKER_00:So so James, what's your message for, like you said, for our audience, for ISOs? What are you telling my clients?
SPEAKER_02:If I'm in the cannabis of the hemp industry, I am nervous. Yeah. One, this is a humongous departure from where things were heading. That's it, you know, what Bernie, I think, said when he was running, you know, I legalize, you know, and everything, government's staying out of it. You know, there is a big thing. I know like organizations like normal are gearing up for this is a preemption issue because it's state's rights, but we're not seeing a lot of that being, you know, there's there's federal troops running all over the place, stepping on states' toes. So if I'm in that industry at any level, I am nervous about where things are going. Yep. Very, very nervous about where things are going and my ability to remain in that business. And I think that it will be a big fight. Because I don't think it's going away, really. I mean Well, but it it seemed like it goes back to you're gonna have to go back to that sketchy dude's house.
SPEAKER_01:Yeah, exactly. It seems like see if he's still around. Yeah, mad dog. Yeah, it's see, it seems like we were actually maybe moving to maybe possibly the federal government finally like allowing you know, allowing the you know, because it's still illegal federally, so the credit cards will not touch it. I I was hopeful that we might be getting to a point of maturity where you know the credit cards could become an option, the federal government would just lighten up, but it's seemingly now we're we're going backwards.
SPEAKER_02:Well, it could it could go back to medical and it could go back for hemp. You know, people use hemp for all you said, you know, all these these creams and sleeplessness and um seizures and everything like that. It could go back to, yeah, you need a prescription to get your protein, your hemp protein. Yeah, crazy. And it could it could go with that way with marijuana too, because that is one area where the preemption issue is that's been pretty clear. State's rights, they get to decide medical. That's how it happened first everywhere, and they're going, that's gonna be a tough one. But again, right now we're seeing uh humongous erosion of states' rights. So I would not be hanging my hat on that, you know, as far as you know, where we're at with that going on. So, what I would be doing if I'm in this space is I would be thinking about continuity programs to have multiple ways to take payments because we know we do a lot of match work where people get shut down. If you can't take payments, you're out of business. You know, that guy whose house I went to, he was cash only. But you know, nowadays I I don't think a dispensary I didn't ever think they could be cash only, but they're gonna have an ATM and that thing better have a whole bunch of money. And if it breaks, you're out of business.
SPEAKER_01:Absolutely.
SPEAKER_02:So I would be hiring some professionals who know a lot of people in the space. I know you know one of those professionals, that would be our law firm, and talking about, hey, what are what should I what are my options here? Because if you have anything less than three right now, I'd be I'd be real nervous. And these this would be huge companies, you know, CBD companies, these are humongous, massive companies shipping all over the world and all of that. And they're, you know, all of a sudden they're being told that they're drug dealers.
SPEAKER_01:Well, I think that also it it would behoove the merchants to be a little proactive and just call their eyes, call the eyes out.
SPEAKER_02:Call your eyes out.
SPEAKER_01:So what what's your stand here? What what is your understanding of of what I should be doing, what changes I should be making? Because you know, ultimately, like a large portion of our of our match cases are are born as a result of the fact that the merchant just made a move that they thought was correct, but they didn't run it by their processor, they didn't run it by their bank, and they hate that. And and so it's basically if you had just asked the question before you took the action, you would not be in the situation. And I think so I think everybody has a right to reach out to their processors and be like, hey, am I am I okay? Like, like, do we need to reevaluate like our my business model? Um because because I would rather shut down voluntarily or or remove something from my my my stock voluntarily than lose payment processing for five years, and then I'm so I'm I'm losing my house.
SPEAKER_02:It's like me with my wife. I'm doing fine as long as she tells me I'm fine every 15 minutes.
SPEAKER_00:James, one thing you've always commented on about the payments industry in general, it's all these entrepreneurs, people who are I their head is on a swivel, is how you like to put it.
SPEAKER_02:Yeah.
SPEAKER_00:I think these are the types of issues I can just imagine the industry right now, all those guys out there, they're doing exactly that. They're seeing, okay, which way do we have to swivel?
SPEAKER_02:Which way do we have to go? And there's people out there that are gonna be able to figure out ways to have a long-lasting merchant program. You know, marijuana, when it first came live, people are just putting it in, and this is still the case. You know, anybody who's goes into a dispensary and sells on that, oh, I can actually really legally process using credit cards, they're wrong. They're just miscoding you, saying that you sell various stuff and hoping somebody doesn't find out. So then they send a secret shopper in and you're they send a secret shopper in, or you know, it's not that hard to figure out. You look at the address and then you go on Google Maps. So um there, you know, the that will happen probably for a little while, but there are people out there that figure out ways to do it in a compliant way. And by compliant, I mean one that lasts.
SPEAKER_00:Yeah, yeah, good point, James. And we know a lot of those people. So, as you said, people listening to this right now who have questions, reach out.
SPEAKER_02:We had someone on the pod, that's who it was. It was that guy on the podcast last week, uh, Noah Fitzgerald. He had they have this great company that is compliance front to back. I mean, that that's why he was so excited because his company is I'm checking everything out. Because probably what will happen is they'll also maybe they'll figure out a way to make it zero, totally zero THC. Yeah, yeah, interesting. Yeah, you're right. Credible. That was credible. Incredible, yeah. That company's full compliance, and he's probably jumping for joy right now because you need that guy at a minimum, and he's the one who's gonna who's gonna know who the players are that are gonna be able to survive the storm.
SPEAKER_00:Yeah, Noah, you're welcome for that. Uh shout out. Yeah, absolutely free advertising. All right, gentlemen, uh, last word.
SPEAKER_02:Uh we said this earlier. If I'm in this, if I'm in the marijuana industry, I would be paranoid right now.
SPEAKER_01:Yeah, I mean I I I know that it is fresh. This happened like Tuesday night, but if I I'll be the canary in the coal mine here, I I just have a uh a real bad feeling about I'm not I I just worry that there's gonna be a lot of um just rushes rushes to judgment as to who can process and who can't. Yep. And and then be you know, our whole line of work is they're not even gonna tell you why they shut you down.
SPEAKER_02:Yeah. Yeah, no, I'm just thinking about the the grocery store that I go to like almost every day. There's full of hemp products on their shelves, lotions, soaps in the salad bar. They'd get put on match.
SPEAKER_00:It's crazy.
SPEAKER_02:And how do you keep it out? You're gonna have to look at you really look at all your products. How do you maybe they snuck a little hemp in that, you know, whatever.
SPEAKER_00:In that cold cereal, you know, there's some hemp seeds in there. Yeah.
unknown:Yeah.
SPEAKER_00:Or the oil. Or the oil. We're gonna get you cook with that. Yeah, I mean, so yeah, we'll see. Excellent. All right, well, thank you so much, gentlemen. And thank you for listening this long to the Payments Experts Podcast, a podcast of Global Legal Law Firm. Thank you for listening to this episode of the Payments Experts Podcast, a podcast of Global Legal Law Firm. Visit us online today at Global Legal Law Firm dot com. Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people, and events is a coincidence.